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Steven Mnuchin will lead the Trump administration’s tax overhaul efforts, he said
at his nomination hearing for Treasury secretary, touching on tax policy changes he
would make.

Among them are lower tax rates, particularly for corporations and passthrough businesses,
Mnuchin told Senate Finance Committee members Jan. 19.

He also called for halting inversion deals in which U.S. companies reincorporate overseas,
and said reducing rates would go a long way to stopping them.

“I think it absolutely has a huge impact on stopping inversions,” Mnuchin said. “I
think there’s some other things that we may be able to do. But I think the biggest
issue that creates inversions is the incentive for much lower taxes abroad than we
have here.”

President-elect Donald Trump believes that U.S. companies have $3 trillion to $4 trillion
in foreign profits sitting overseas, Mnuchin said. Repatriation would force a large
share of that income into the U.S., he said.

“We’re going to get a lot of money back,” Mnuchin said.

The repatriation figure is commonly estimated at about $2 trillion.

The overall tax revamp effort shouldn’t result in more red ink for the federal budget
when factoring in economic growth estimates through dynamic scoring, Mnuchin said,
though he said a dynamic estimate of tax ideas from Trump’s campaign would lose about
$2 trillion.

He said the incoming administration is targeting economic growth of between 3 percent
and 4 percent.

Border Disputes

“He has not suggested in any way an across-the-board, 35 percent border tax,” Mnuchin
said. “If anything, quite the contrary.”

But Trump has concerns about certain prices rising for consumers, such as an increase
in gas costs, Mnuchin said.

Mnuchin also said he would consider dropping proposed regulations related to valuing
estates, pledged to examine offshore tax avoidance and suggested the Internal Revenue
Service might need more personnel to more efficiently collect revenue. He declined
to weigh in on potential changes to the earned income tax credit but called for bipartisanship
as part of the process going forward when pressed by Wyden to discuss bills to expand
the credit.

“I don’t want to comment on specific legislation on tax,” Mnuchin said. “I think that
tax reform needs to be looked at as an overall policy and I’ve laid out a certain
framework for what I believe the president-elect believes in.”

The passthrough option wouldn’t be gamed, he said, adding that he wanted to ensure
that hedge fudge managers don’t use passthroughs to avoid higher personal income taxes.

“We’ll make sure we work with Congress to make sure that we close loopholes so rich
people don’t use this as a way to get lower business tax,” Mnuchin said.

He also pledged to strengthen whistle-blower protections at the IRS and said he would
ensure the agency wouldn’t target taxpayers for their political beliefs.

Cross-Border Criticism

Mnuchin pushed back on assertions by Wyden, who said the nominee dodged U.S. taxes
by running hedge funds set up in the Cayman Islands and Anguilla, places with zero
percent tax rates.

The offshore entities were set up there to accommodate investors such as nonprofit
foundations, pension funds and a small number of foreign investors, Mnuchin said,
adding that he paid all his taxes as required.

Wyden’s opening remarks on the topic prompted criticism from Sen. Pat Roberts (R-Kan.),
who offered Wyden the anti-anxiety drug Valium. That triggered a testy exchange. Roberts
said he was trying to lighten the mood and then left, after which Mnuchin began his
opening remarks.

Wyden said the wealthy shouldn’t get tax cuts under what he called the “Mnuchin rule,”
a reference to a comment Mnuchin made in a CNBC interview in November, where he said
Trump’s plans wouldn’t provide absolute tax cuts for the upper class.

The senator also alleged tax abuses by Mnuchin through a foundation and trusts. In
addition, Wyden and other Democrats on the panel criticized Mnuchin for failing to
disclose $100 million in property assets and past management positions until the day
before the hearing, as did Senate Minority Leader Charles E. Schumer (D-N.Y.).

Separately, at a press conference held at the same time as the hearing, Schumer said
Mnuchin tried to hide his Cayman Islands holdings.

Foreclosure Overhang

Schumer stood next to photographs of some Trump cabinet nominees, including a photo
of Mnuchin labeled “Foreclosure King”—referring to his role as owner of OneWest Bank,
a mortgage lender accused of unfair loan practices, a topic that Democrats hit on
throughout the hearing.

Criticism of the nominee also came from across the aisle when Sen. Dean Heller (R-Nev.),
expressed displeasure with Mnuchin’s lack of information on foreclosures in Nevada.

Finance Committee Chairman Orrin G. Hatch (R-Utah) decried Democrats’ opposition to
all Trump nominees. Hatch called Mnuchin qualified and said allegations against Mnuchin
lack credibility. He also reminded Democrats of offshore tax allegations raised about
some of President Barack Obama’s nominees.

A committee vote on his confirmation won’t happen until after Mnuchin finishes questions
for the record, which members of the panel haven’t yet completed. Should he clear
the committee vote, Mnuchin’s nomination would then go to the Senate floor.

Only a couple of Trump’s nominees are scheduled for Senate votes after the inauguration
on Jan. 20, in contrast to seven nominees who received Senate approval right after
President Obama was sworn into office eight years ago.

With assistance from Kaustuv Basu in Washington.

To contact the reporter on this story: Aaron E. Lorenzo in Washington at
aaron@bna.com

To contact the editor responsible for this story: Meg Shreve at
mshreve@bna.com

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